Volatility

January 29, 2011

The MERS Wave Function (2 of 3)

Filed under: Corporatism, Land Reform, Law, Sovereignty and Constitution — Tags: , — Russ @ 7:28 am

 

For a long time to come, the curve of protest against the banks is likely to be longer and more ponderous than the exhilarating street protests in Egypt. But protest in the form of subversion and rejection of the land model enforced by the banksters, including relentless educational work and exposure of the Land Scandal, will eventually bring us by strange paths toward the same end goal. The real goal in both cases, however consciously conceived at the outset, has to be economic transformation. Otherwise nothing avails, and we end up right back where we started, having wasted energy and lost time. In the case of the banks, we should be fully aware by now of their worthlessness and incorrigible criminality and will to tyranny. They cannot be rehabilitated. They’re tyrannically insane and can only be eradicated completely and permanently.
 
In the first part of this post I described an intellectual framework for social counteraction. Just as the banks, through devices like MERS, have set up a process whereby they exercise the prerogative to exist only in whatever time, place, and form they unilaterally choose, so we must turn this right side up and impose existence, and eventually non-existence, upon them in a time, place, and form of our choosing. They want their word to become flesh at whatever point is convenient for the corporate interest. We must declare and then enforce whatever reality achieves the public interest outcome.
 
What proves that this is the right road? All power resides in the people. All sovereignty resides in the people. The Constitution is derived from We the People. Since the people can never contemplate their own destruction, enslavement, or harm, it follows that the Constitution always seeks the public’s well-being. So if we have formally bizarre entities, dubious at best from the Constitution’s perspective, and often clearly odious; and these entities freely chose to define themselves in an ambiguous way; then it follows that the Constitution always chooses the definition and the perspective which is most beneficial to the people.
 
If in any case this perspective is the one most harmful to the criminals (and it almost always will be), that’s as it should be. That’s the genius of the sovereign people.
 
In this case, we have one of history’s most vast and malign criminal scams playing out. To review:
 
1. The basic con of securitization was to fraudulently sell MBS to gullible investors, advertising them as being of higher grade then they really were.
 
2. This was combined with the parallel fraud of selling overpriced loans to home buyers under the false pretense that housing prices and wages would permanently rise, so the borrower would definitely be able to afford the mortgage until he decided to sell the house, at which point he’d collect the accrued equity.
 
3. But right from the start the banksters knew they were systematically destroying American jobs and driving down American wages. The borrowers themselves were the banksters’ targets for this liquidation. And they knew a permanent housing bubble was absurd.
 
So both of the fundamental premises on which these mortgages were sold were lies. Most or all mortgages that have been sold since the late 90s were fraudulently induced.
 
That’s in addition to more conventional predatory lending practices. The government and the MSM hyped the scam relentlessly, since they too wanted the bubble to (temporarily) succeed. (I suppose some in the government and media were stupid enough to actually believe the hype.)
 
4. The plan was then to bundle these mortgages into securities, slice them into tranches of differing nominal quality, pool them in trusts, and sell them to investors.
 
The notes were supposed to be promptly conveyed to the trusts as per the Pooling and Servicing Agreements (PSAs). The PSAs were set up according to NY state trust law in order to earn favorable tax treatment and reassure investors of how failsafe the process was.
 
But the sellers never actually intended to convey the notes as promised. When they failed to properly convey the notes, this rendered the securities fraudulent and the trusts null and void. All those toxic assets on the banks’ balance sheets have always actually been worse than fiscally toxic – they’re completely nonexistent, legally. 
 
The reason the banks failed to convey the notes was because they knew that somewhere down the line the loans would start to default. They wanted to maintain the freedom to assign the mortgages to the trust only as they defaulted. That way they could manage which tranches took the hits, and how well their CDS bets against their own MBS products would pay off.
 
That’s one example of how they wanted total licence to collapse the wave function at will. The contents of the trusts were smeared out as a wave for as long as the incidence of default was smeared out. As soon as a particular loan defaulted, its loss was then supposed to be assigned to the most expendable tranche of the most expendable trust.
 
That’s also why, as we saw with the farcical documentation the banks submitted in the Ibanez case, PSA loan schedules are prone to be vague about their actual contents, for example listing only a zip code and town but not a borrower name or street address. The former information is noncommittal enough to let the bank be flexible in retroactively assigning the defaulted loan; the latter would forestall this flexibility.
 
5. As an ancillary crime, they also wanted to evade all the taxes and recording fees to which they’d be liable as the notes kept changing hands along the chain of title.
 
6. And since the banksters anticipated that the bubble would burst and it would come time to foreclose on millions of homes, they needed to be able to obscure the fact that the notes were never properly conveyed. They needed to be able to foreclose without it being evident that the notes had never been conveyed to the trusts, and that whoever was foreclosing usually had no legal right to do so at all.
 
To solve the problems of 4, 5, and 6, the criminals engineered MERS. This electronic registry has been compared variously to EBay, Craigslist, or Wikipedia, but with far less transparency or oversight than these. This chaos was by design. MERS’ purpose was to send all information about the notes and liens down a rabbit hole where no one had any authority or accountability. MERS “members” would simply type in whatever words they chose. They’d conclude “electronic handshakes”, as MERS put it. There was never any requirement or confirmation audit to vouch for the reality of any of the alleged transactions. It was simply an “electronic phone book” which, by some “legal pretzel logic”, was alleged to be authoritative when MERS would appear in court to foreclose. (Fannie and Freddie tried to enshrine this by institutionalizing MERS as Original Mortgagee (MOM) language in their own documents.) Only at this moment of the banks’ choosing was MERS supposed to collapse the wave function and miraculously retrieve the information from its black hole of opacity, that Yes, this trust owns this loan and has the right to foreclose. The fact that no note could be produced, and no chain of title conveyance established according to the law, was supposed to be ignored. Robo-signed “lost note affidavits”, thousands and eventually millions of them, would invade the courts. MERS would lawlessly assert the bank prerogative, hopefully the ignorant and hapless debtor wouldn’t fight back, and the judge would roll over if necessary. Responsibility was to disintegrate completely, while corporate prerogative was to have total license.
 
That was the plan.
 
But something went wrong with this perfect crime. Victims of foreclosure, only a few at first, did ask questions. They fought back. And they started finding judges who weren’t so impressed with the banksters’ Galtian grandeur. Sure enough, the first moment a smart and self-respecting homeowner challenged the banks’ foreclosure system and found a conscientious judge to look at the evidence, the whole thing came crashing down.
 
In the final part I’ll detail how the MERS scam is unravelling. I’ll just leave off for now with one obvious conclusion the courts have come to: Since the MERS registry is nothing but shady characters talking about what they allegedly did or plan to do, usually with no supporting evidence, the California courts have found that testimony from MERS in itself is nothing but hearsay:
 

RULES OF EVIDENCE – A PRACTICAL PROBLEM

This structure also possesses practical evidentiary problems where the party asserting a right to foreclose must be able to show a default. Once again, Judge Bufford has addressed this issue. At In re Vargas, 396 B.R. at 517-19. Judge Bufford made a finding that the witness called to testify as to debt and default was incompetent. All the witness could testify was that he had looked at the MERS computerized records. The witness was unable to satisfy the requirements of the Federal Rules of Evidence, particularly Rule 803, as applied to computerized records in the Ninth Circuit. See id. at 517-20. The low level employee could really only testify that the MERS screen shot he reviewed reflected a default. That really is not much in the way of evidence, and not nearly enough to get around the hearsay rule.

 
That’s the reality, as different courts in different ways are concluding. We’re beginning to drive MERS from the courts like driving thugs from the streets. And without the MERS fig leaf to conceal them, the banks will find it impossible either to establish any right to foreclose at all, or else to do so without laying bare the fact that the MBS trusts are void and the MBS themselves nothing but fraudulently sold unsecured paper.
 
If we can force this wave function collapse upon the banks, who knows how devastating it may be to them. It may lead to their destruction. And it may give us the political and even legal pivot point we need to start taking back the land itself.
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4 Comments

  1. “The reason the banks failed to convey the notes was because they knew that somewhere down the line the loans would start to default. They wanted to maintain the freedom to assign the mortgages to the trust only as they defaulted. That way they could manage which tranches took the hits, and how well their CDS bets against their own MBS products would pay off.

    That’s one example of how they wanted total licence to collapse the wave function at will. The contents of the trusts were smeared out as a wave for as long as the incidence of default was smeared out. As soon as a particular loan defaulted, its loss was then supposed to be assigned to the most expendable tranche of the most expendable trust.”

    I found this part of the post confusing. My understanding of the way most MBS worked was that although no specific mortgages were assigned to specific tranches (to allow defaults to be assigned to lower-seniority tranches, as you say), the deal as a whole was always based on a specific, defined pool of mortgages. You seem to be contending that (at least some) MBS wasn’t actually backed by specific mortgages. If I recall correctly, some minimal auditing was actually conducted of some MBS, I think some independent auditor assessed the quality of around 15% of the mortgages assigned to a few deals. This suggests that specific mortgages must have been assigned in at least some cases. Obviously the PSA schedules are no help here, but are you saying there is literally no documentation of what mortgages constituted the pool in some MBS? I have no legal expertise, obviously, but it seems to me that if that’s the case, that’s prima facie evidence of fraud or negligence at the very least- there’s no actual product being sold!

    Comment by paper mac — January 29, 2011 @ 3:25 pm

    • The Ibanez decision found that the PSA was too vague to establish that the mortgage had been conveyed to the trust.

      Adam Levitin decided to look at some other PSAs to see if their loan schedules were more precise.

      http://www.creditslips.org/creditslips/2011/01/ibanez-about-that-loan-schedule.html

      He found that the vague list in that PSA was no outlier, but that it’s apparently common practice. “SNAFU”, he called it, with the emphasis on “normal”.

      So based on that and many analyses I’ve read about what the banks are really up to here, for example this one from Ellen Brown:

      http://www.counterpunch.org/brown10082010.html

      The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default. The clever designers of these vehicles tried to have it both ways by conveying the properties to an electronic dummy conduit called MERS (an acronym for Mortgage Electronic Registration Systems), which would hold them in the meantime. MERS would then assign them to the proper tranche as the defaults occurred.

      I infer that this SNAFU must mean that there’s a high incidence (I don’t know how high) of mortgages which were not only never conveyed to the trust (which we already knew from all the robosigning and inability to produce the note), but which weren’t even clearly listed on the loan schedule. Like in the example from Ibanez, how it seems that the zip code was supposed to be sufficiently vague yet comprehensive enough to receive defaults whenever the MBS seller wanted to assign them (since I guess they could identify particular zip codes where there would be clusters of defaults).

      If you ever saw the movie “Fargo”, this is making me think of the scene where the crook who used nonexistent automobiles as collateral to take out a big loan is trying to write serial numbers for them which are just garbled enough that there will be a delay before the auditor gives up and says “I can’t read these, you’ll have to resubmit them.” What might now be happening to the MBS trusts is something like that, if more and more courts are like that auditor and say, “I can’t read these loan schedules.”

      That’s what happened in Ibanez.

      Comment by Russ — January 29, 2011 @ 4:20 pm

  2. […] Sovereignty and Constitution — Tags: MBS, MERS — Russ @ 5:46 am   Parts one and two.   So what’s the actual mechanism of this MERS wave, and how are the courts finding that […]

    Pingback by The MERS Wave Function and Corporatism (Conclusion) « Volatility — January 30, 2011 @ 5:46 am

  3. […] was premeditated and had its origin in the legalization of what are naturally outlawed acts. The massive conspiracy, dating back to the 90s, to fraudulently induce mortgages was enabled by this original legalization. And the rest of the crimes were piggybacked on these. […]

    Pingback by Corporatism is Legalized Crime « Volatility — March 14, 2011 @ 5:35 am


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